RIYADH: Qatar’s temporary halt in liquefied natural gas output has become the most immediate energy-market shock from the US–Iran war, tightening global supply expectations and driving gas prices sharply higher as buyers in Asia and Europe scramble to gauge how long the disruption will last and whether volumes can be replaced.

The outage is significant because Qatar sits at the heart of the seaborne gas trade, accounting for about 20 percent of global LNG exports. Most shipments transit the Strait of Hormuz, with QatarEnergy exporting nearly 81 million metric tonnes in 2025.

Head of Economics and Next Generation Research at Julius Baer, Norbert Rucker, said the market’s reaction has been most visible in gas rather than oil. 

“While oil’s reaction has been almost surprisingly unemotional, natural gas prices have spiked related to the war in the Middle East. The precautionary shutdown of Qatar’s export facility alongside the halting of trade through the Strait of Hormuz fuels supply concerns,” Rucker told Arab News. 

“A full and lasting disruption would indeed be serious, and this seems to be partially priced in by the market. However, damage to energy facilities remains minimal so far, and the natural gas market has entered the spring season, where demand is pummelled by strong renewables power generation,” he added. 

Rucker said the initial driver of the move has been fear of a sustained loss of supply from a small number of critical LNG facilities. 

“The sharper reaction to the war in the Middle East came from global natural gas markets. The news about a shutdown of Qatar’s main liquefaction and export facility, alongside precautionary production curtailments in the Middle East, stoked fears about energy supply security, mainly in Europe and Asia,” he said. 

Rucker added that Qatar ranks among the world’s top three exporters of seaborne natural gas, and any prolonged disruption would be concerning.

The extent of the outage remains unclear, though the drone strike appears to have caused no significant damage. He added that recent attacks on oil and gas infrastructure have largely been intercepted or resulted in only limited harm.

Rucker said the key question is how much global gas supply is ultimately at risk, particularly with storage levels drawn down after the winter heating season. He argued there are offsetting factors that could cushion the impact, starting with seasonal demand. 

“The spring shoulder season increasingly sees strong renewable power generation and a sharp drop in natural gas demand,” he said, adding that this creates time to “weather a disruption in the Middle East and refill storage with imports later in the year.”

If the disruption persists, Rucker said demand-side flexibility could also play a role. “If push comes to shove, switching to coal fuel use at power plants balances supplies and offsets any lasting outage in the Middle East,” he said, adding that “prices above €40 ($46.38) seem to incentivize this scenario already.”

Europe’s benchmark TTF gas contract surged as much as 50 percent during the session before ending the day 39 percent higher at €44.51 per megawatt hour, marking its largest one-day percentage gain in more than four years. 

In Asia, the JKM benchmark was assessed at the equivalent of €43.95 per MWh, up 41 percent on the day. Even after the jump, prices remained well below the extremes of 2022, when Europe’s gas benchmark briefly climbed to around €340 per MWh at the height of the post-invasion energy crisis, FT reported.

Rucker said gas remains structurally more exposed to concentrated infrastructure risk. “The natural gas market seems more vulnerable to attacks in the Middle East, given that supply comes from fewer facilities,” he said, adding that natural gas has historically been “the more nervous, emotional, and volatile energy market compared to oil,” with “memories of the energy crisis” still fresh.

“For these reasons, we shifted our view to Neutral earlier this week,” Rucker said. However, he argued the longer-term supply outlook is unchanged: “the big picture of a liquefied natural gas wave crushing prices remains in place,” though it is “currently simply overcast by geopolitics.”

He also downplayed the risk of immediate knock-on effects in European power prices, saying the gas spike is “unlikely to pass through to electricity prices in Europe.” During spring, he added, electricity prices “tend to trade well below the natural gas fuel cost ceiling due to abundant renewable power generation.”

On the supply side, the scale of the potential loss is material even if the outage proves short-lived.

In a March 2 note, energy consultancy Wood Mackenzie said around 81 million tonnes of LNG transited the Strait of Hormuz in 2025, “primarily from Qatar,” amounting to nearly 20 percent of global LNG supply, and warned that losing roughly 1.5 million tonnes a week of LNG exports would force Asian and European markets to draw more heavily on storage and keep the market tight even after flows resume.

Vijay Valecha, chief investment officer at Century Financial, framed Qatar as a single point of failure for LNG trade. “Qatar is an anchor to the LNG market. The country produces approximately 77 million tons of LNG per year. To contextualize this in simple terms, Qatar is responsible for 20 percent of the world’s LNG, and 90 percent of it flows through the Strait of Hormuz,” he told Arab News. 

“With Qatari LNG production on hold due to Iranian attacks and the Strait of Hormuz closed, LNG has reached a global chokepoint.”

Valecha said the heaviest exposure sits in Asia, where Qatari volumes underpin power generation and industrial demand.

“Around 85 percent of Qatari LNG flows to Asia, and 12 percent goes to Europe. In Asia, the biggest importers at risk are India, Taiwan, China, and South Korea,” he said. 

“Qatari LNG forms 30 percent of China’s LNG imports, 42–52 percent of India’s LNG, 14–19 percent for South Korea’s LNG, and 25 percent for Taiwan’s LNG. We can now understand the scale. A Qatari shutdown would send both spot and term LNG prices sharply higher,” Valecha stated.

Europe’s direct reliance on Qatar is lower than Asia’s, but the region is vulnerable to second-round effects as Asia competes for replacement cargoes. 

Reuters reported that Qatar supplied about 7 percent of Europe’s LNG in 2025, but warned that the disruption could reverberate globally, especially because European storage is unusually depleted for early March, with Europe’s gas reserves around 30 percent full versus a 54 percent average, and some major storage sites at critically low levels.

Valecha argued Europe has a limited buffer after the 2025 winter. “Moreover, Europe is also in trouble. During the Russia–Ukraine war, Europe redirected efforts toward Qatar as a key supplier. Qatar is the fourth-largest supplier of the EU’s LNG needs. While Europe is less reliant on Qatar than Asian markets, the current production halt at Qatari facilities has triggered severe price volatility across European energy hubs,” he said. 

“As Asia scrambles for alternatives, LNG prices will most definitely surge. This is a massive problem for Europe because storage levels have dropped to a 30 percent low capacity due to the harsh winter of 2025. Before Europe could replenish reserves, it was hit by this disruption,” he added. 

Early signs of rationing have already emerged in price-sensitive markets. Reuters reported that Indian companies reduced natural gas supplies to industrial users in anticipation of tighter availability after Qatar halted production, with cuts of 10 to 30 percent communicated to some customers, citing industry sources.

Valecha said higher gas prices could quickly ripple through industrial and food supply chains.

“The industrial consequences extend well beyond power markets. Natural gas is the primary feedstock for ammonia and fertilizer production globally. A sustained Qatari shutdown would spike fertilizer prices within weeks, feeding directly into global food inflation at a time when supply chains are already under pressure from the broader conflict,” he said.

The disruption is also reshaping global LNG trade flows. The Financial Times reported that US exporters are moving to increase output from existing facilities in Texas and Louisiana and accelerate additional capacity as European and Asian benchmark prices surge. Traders are simultaneously redirecting cargoes toward the highest-priced markets, tightening availability elsewhere.

According to the FT, companies including Venture Global and Cheniere Energy are among those seeking to capture the price spike. Venture Global shares rose nearly 20 percent on March 2, while Cheniere Energy gained 5.6 percent, reflecting investor expectations that US producers will benefit from stronger spot LNG prices amid curtailed Qatari supply.

Analysts say the length of the outage and whether LNG carriers can safely transit Hormuz will determine if the spike turns into a new energy crisis or remains a temporary squeeze.

Wood Mackenzie said disruptions could reignite competition between Europe and Asia for cargoes and keep the market tight well beyond the resumption of trade, even if the closure proves temporary.